Africa on the Move

African Economies Encourage Investors Seeking Long-Term Growth

December 29, 2014

By Paul Trustfull

The African economy holds tremendous promise for strong growth, according to both the International Monetary Fund (IMF) and the World Bank. While the economic outlook for places such as South America, Europe and Central Asia has weakened considerably, the World Bank projects that sub-Saharan countries will offer attractive prospects for investment and post GDP growth over 5% in 2015 and 2016, up from 3.9% in 2013—previously unheard of in Africa.

The recent U.S.-Africa Leaders Summit, hosted by President Obama in August 2014, has helped to spur investor interest in the region. The summit produced more than $14 billion in deals, such as the $5 billion energy deal between Aliko Dangote of the Dangote Group and the Blackstone and Carlyle Groups. Foreign direct investment in sub-Saharan Africa topped $42 billion in 2013, according to data from the World Bank. Investors are seeing the burgeoning African economies in a new light. Pressure from a growing middle class and a push for infrastructure development mean there are an increasing number of opportunities for American investors to participate in this growth.

Countries like the Democratic Republic of Congo and Nigeria are leading the way—they posted 8.5% and 5.9% GDP growth rates, respectively, in 2013. Their potential is just one of the many reasons that the next generation of investors should turn to Africa as a place of opportunity.

Building Prosperity in Nigeria

Jonathan Administration Leaders Cite Progress on All Fronts

“An exciting transformation is taking place on the continent of Africa,” said Nigeria’s Finance Minister, Dr. Ngozi Okonjo-Iweala, in an October 8 address to the Atlantic Council. Under President Goodluck Ebele Jonathan’s administration, Nigeria is leading that transformation.

President Goodluck Jonathan meets with President Barack Obama during a September 2013 visit to the U.S.

“In the decades of the 1980s and 1990s, we saw an Africa that was heavily indebted, with an average debt-to-GDP ratio of 75%,” Okonjo-Iweala said, describing an Africa “plagued with slow economic growth of about 2% annually, hyperinflation—with inflation rates as high as 48% on occasion— and rampant poverty; an Africa troubled by civil wars and political strife; and an Africa in desperate need of donor aid and assistance.

“Fast-forward two decades, and the story is remarkably different,” said the finance minister.

Economy: Fast-Growing With Low Debt

“We see now an Africa whose economy is growing faster than most economies in the world, with better than 5% annual growth in GDP,” Okonjo-Iweala continued. “We see an Africa with low debt, averaging about 32% of GDP—which is certainly much lower than those of developed countries, including the U.S. and several in Europe—low inflation at single digit on average, and a middle class that has nearly tripled in size, from about 126 million people (or 27% of the total population) in 1980 to nearly 350 million people (or 34% of the population) by 2010, according to the African Development Bank.

“We see an Africa that is obviously enjoying a peace dividend and better governance, with democracy now entrenched in most countries,” Okonjo-Iweala continued. “We see an Africa that foreign investors are now courting, with FDI (foreign direct investment) increasing from $9 billion in 2000 to about $50 billion by 2012.

Klaus Schwab, Founder and Executive Chairman, World Economic Forum, Chinese Premier Li Keqiang and Nigerian President Jonathan at the World Economic Forum on Africa in Abuja in May 2014.

“Africa has come a long way. It has gone from a lost cause to an almost-hot prospect. Now you may think this sounds strange, when all everyone is talking about is the Ebola crisis and flashpoints of insurgency like the Boko Haram in Nigeria and al-Shabab in Kenya. You might also think it sounds strange with conflict in Central African Republic and South Sudan.

“Yes, these are certainly challenges. Ebola could be devastating if not decisively dealt with as a global challenge. The IMF estimates 1.5% to 3.5% off the growth rates of Liberia, Guinea and Sierra Leone. Nigeria and Senegal are relatively unscathed. But if not stopped, Ebola will travel, as we have seen, and could cause considerable harm.

“But Ebola is not a problem that is permanent. It is a problem that can be managed, so don’t expect it to reverse Africa’s growth trajectory. Boko Haram and al-Shabab are real problems, but again, the pushback is beginning. What is interesting is that the existence of these problems has not managed to turn back the tide of a better-performing Africa.”

Today, Nigeria is the largest economy in Africa and the 26th largest in the world, with a GD P of $510 billion and perhaps the most diverse economy on the continent.

Nigeria: An Example of “Africa Rising”

Okonjo-Iweala described Nigeria as “perhaps one of Africa’s most successful stories.” The return to democratic rule at the turn of the millennium brought with it better macroeconomic management and a series of reforms that unleashed economic growth, with GDP growing at an average 7% per annum during the last decade, she said. This growth was driven by the non-oil sector, particularly telecommunications, manufacturing, construction, wholesale and retail.

Today, Nigeria is the largest economy in Africa and the 26th largest in the world, with a GDP of $510 billion and perhaps the most diverse economy on the continent. Only 15% of its GDP comes from resources (mainly oil and gas). The services sector accounts for 51%, agriculture 22%, telecommunications 8.7%, manufacturing 6.7% and the film industry (known as Nollywood) 1.2%.

Nigeria, with about 170 million people, has nearly 20% of the African continent’s population, and is also its largest market. A recent report by the McKinsey Global Institute counted almost 40 million Nigerians in the consuming class, defined as households with incomes exceeding $7,500 a year.

At a recent forum in Abuja, Nigeria’s ministers of finance, works, and trade and investments presented scorecards that addressed Nigeria’s progress in these vital areas since President Jonathan took office in 2011.

A campaign billboard for President Jonathan and Vice President Namadi Sambo along Abuja thoroughfare.

Nigerian Economy Grows to Largest in Africa

Okonjo-Iweala said that under President Goodluck Jonathan’s administration, Nigeria’s economy grew to the largest in Africa, burgeoning from a GDP of $46.4 billion in fiscal year 2000 to $510 billion in 2013.

She said the Nigerian economy is now comparable in size to those of countries such as Argentina and Austria. Nigeria’s average growth rate—more than 7% in the last five years—is higher than the average for sub- Saharan Africa.

Economic Indicators Improve

Nigeria’s credit ratios also have strengthened. Debt-to-GDP ratio declined from 21% to 11%, and the planned budget deficit for 2014 is 1% of GDP.

President Jonathan cuts the ribbon at the Lower Usuma Dam Water Treatment Plant (Phase 3 and 4) inauguration in Abuja in April 2014. With him are: Chairman of the Senate Committee on Power Senator Philip Tanimu Aduda, Minister of Federal Capital Territory Senator Bala Abulkadir Mohammed and Minister of Federal Capital Territory Oloye Olajumoke Akinjide.

More than ever before, Okonjo-Iweala said, the Nigerian economy is strong, with stable exchange rates and declining inflation. Currently, inflation is 7.9%, compared to 14.1% in June 2010. In fact, the stretch of single-digit inflation this year is the longest since 2008, reflecting President Jonathan’s policy during the last three years to reduce government recurrent expenditures in relative terms, reduce budget deficits and complete unfinished projects.

“For instance, annual borrowing was $3.2 billion in 2013 compared to $4.7 billion in 2011,” said Okonjo-Iweala. “Following President Jonathan’s reform program and the huge potential in the Nigerian economy, Nigeria has emerged as the No. 1 investment destination in Africa in the last four years. Nigeria attracted foreign direct investment of over $25 billion from 2010 to 2013. This is in addition to the significant and increasing domestic investments being made across sectors such as agriculture, manufacturing, petrochemicals, power and so on.”

Nigeria Then and Now

In her October 8 speech to the Atlantic Council Africa Center, Okonjo-Iweala summarized the problems Nigeria faces while maintaining her optimism that the Jonathan government’s reforms will solve them.

“Nigeria is certainly an economic powerhouse and deserves to be a member of clubs of its peers like the G-20. But more often than not, Nigeria is underrated, with its sore points magnified beyond belief, particularly in the Western media. My country receives little or no praise, even when things are done right, but is left battling with prejudice [that portrays it as] a country where nothing works.

“Take as an example the recent fight to contain the deadly Ebola virus. The efforts of Nigerian medical personnel that prevented the early spread of this deadly disease to the United States are rarely acknowledged.

“The individual, now known as the index case, who brought the disease into Nigeria from his own country, Liberia, was actually on his way to the U.S. when he took ill and was quarantined in a hospital in Lagos after he was found to have been infected by the deadly virus. Sadly, members of the medical team that looked after him also died. They are the true heroes of this global war against Ebola.

President Jonathan at the World Economic Forum in Abuja (Photo: Ladidi Lucy Elukpo)

“A total of 19 confirmed cases were found in Nigeria—most of them primary contacts of this index case. Seven of these people died, while 12 recovered, thanks to the work of our medical personnel. Hundreds of people were quarantined for periods of time in an effort to curb the spread.

“For about a month now [October 8, 2014], no new cases of the Ebola virus have been found—which for a country of Nigeria’s size is truly remarkable. And I believe this is due to the measures put in place by our government. Had the Nigerian government been slow to act or ineffective to tackle the spread of the virus, the reality would be much worse.

“Nigeria has also supported other West African countries who are struggling to contain the disease with a $3.5 million grant. Yet, until the past week, Nigeria did not receive much credit for these efforts.”

Opportunities and Obstacles in Nigeria’s Economic Future

Jim Ovia is optimistic about Nigeria’s economic future. Since founding Zenith Bank Plc almost 25 years ago, Ovia has been a witness to, and a participant in, the country’s impressive growth. Today, Nigeria’s rebased GDP stands at $510 billion, up from a mere $286 billion in 1990.

Over half of Nigeria’s growth in the last two-and-a-half decades has come from the services sector, rather than the country’s traditional mainstay, the oil and gas sector. Jim Ovia, group chairman of Zenith Bank Plc, says the economy’s performance—with real GDP growth in non-oil sectors of 5.4%, 8.3% and 7.8% in 2011, 2012 and 2013, respectively— continues to be driven by improvements in non-oil sectors. So while Ovia remains cognizant of the potential hurdles facing the country’s continued development, he says, “I see a great future for Nigeria.”

Jim Ovia, Chairman of Zenith Bank

New Opportunities

As Africa’s largest economy, Nigeria offers a vast market for goods and services, which has made it a major frontier market for foreign investors. And although investing in Nigeria remains a high-risk proposition, Ovia says it may be one of the few countries that can offer investors close to 30% return on investment. That’s a reward he believes many will be eager to capture. “Entrepreneurs as we know them, including myself, are all risk takers,” he says. “If you don’t dare, you don’t win.”

Encouragingly, Nigeria’s economic fundamentals remain strong compared to other frontier markets, given the country’s relatively low debt-to-GDP ratio and budget deficit. Looking forward, Ovia sees increasing opportunities for investment in manufacturing, agriculture and tourism. “These are areas that beckon to genuine investors who are willing to take the risk and invest long term for big profits,” he says.

Challenges Ahead

Despite the country’s economic promise, Ovia acknowledges that Nigeria must address several challenges if it is to achieve further successes on the world stage. Among them are several parameters for global competitiveness identified by the World Economic Forum, such as the maintenance of basic infrastructure, the establishment of health and educational systems, workforce training and the development of the country’s financial market. In addition, he says, successful countries safeguard the people and property within them. Ovia notes that the Nigerian government is already building capacity in these areas.

Zenith’s Growing Role

Given Zenith Bank’s expanding global footprint, Ovia is optimistic about its emergence as an African megabank: The bank is listed on the London Stock Exchange, and plans to develop a presence in South Africa and China. Meanwhile, at home, Zenith Bank has helped fund the ongoing divestiture of international oil assets to indigenous oil companies and was at the forefront of funding the federal government’s sale of power infrastructure to private investors.

Today, Ovia relishes his position as chairman of a successful Nigerian bank, noting that it gives him the opportunity to portray the country in a positive light globally. “As a positive ambassador of Nigerian entrepreneurship, I am proud to be a Nigerian,” he says. “In this role I will continue to promote Nigeria’s blossoming investment climate.”

Nigeria's Advances in Housing, Infrastructure, Industry and Business

In her speech to the Atlantic Council, Nigeria’s Finance Minister, Dr. Ngozi Okonjo-Iweala, explained that, “in the housing sector, we launched another revolution, the Nigeria Mortgage Refinance Company (NMRC ), in January 2014 to facilitate and guarantee mortgage liquidity to qualified financial institutions in a bid to close the housing gap.

President Jonathan pushes the switch on automated construction equipment at the groundbreaking ceremony for the construction of the second Niger Bridge in March 2014. To his left is Minister of Works Mike Onolememen.

“Through supporting mass-housing programs, we hope the NMRC will provide up to 200,000 affordable mortgages within the next five years. When we advertised for 10,000 mortgages, we received over 66,000 applications.

“We expect to create hundreds of thousands of jobs—good jobs for plumbers, carpenters, welders, architects, surveyors and designers in the housing sector. America and the UK have long understood the value of the housing sector as a social good. We are only catching up now—reforming our land use and land titling systems, putting foreclosure laws in place to make it possible,” Okonjo-Iweala said.

(Photo: Ladidi Lucy Elukpo)

“Nigeria is perhaps one of Africa’s most successful stories.”
Dr. Ngozi Okonjo- Iweala, Minister of Finance

Road and Rail Developments Nationwide

Works Minister Arch. Mike Onolememen said his ministry has made significant strides in road development since President Jonathan’s election in 2011.

The ministry restructured the existing two highway departments into 12 departments. Each of Nigeria’s six geopolitical zones now includes a department of highway construction and rehabilitation to supervise and manage highway projects, as well as a private-sector team to monitor ongoing highway construction and rehabilitation works and render independent quarterly reports.

Road-Sector Reform Bills Approved

A road-sector reform committee, composed of registered engineers and other Nigerian experts, is charting a road map for reform. Nigeria’s Federal Executive Council recently approved the committee’s draft bills creating a federal road authority and a national road fund.

Onolememen said the new bills would not only attract the private-sector funds required to fill the funding gap in the development of Nigeria’s road infrastructure, but also would lead to the creation of more business opportunities for engineering professionals and other Nigerians.

The works ministry has introduced an important new system that restricts government payments to contractors. It permits payment only for permanent roadworks, reducing or eliminating government losses attributed in the past to corrupt business practices.

Rehabilitation, Reconstruction and Expansion

The ministry has completed 62 road rehabilitation, reconstruction and expansion projects and has made progress on many more. When President Jonathan took office in 2011, just 16% of Nigeria’s roads were driveable. Today, that number has increased to 70%. Of 35,000 km of federal highways, the ministry has improved 20,500 km—16,000 km since 2011.

The Central Bank of Nigeria in Abuja (Photo: The Guardian, Nigeria)

Travel times on most of Nigeria’s arterial roads have improved dramatically, reducing fuel consumption and maintenance costs for drivers, increasing socioeconomic integration and empowering Nigerian citizens. Even some transport companies have reduced their fares in response to these efficiencies.

New requirements for the use of bitumen emulsion in all road projects—and the abolition of kerosene—comply with the Kyoto Protocol, which discourages the emission of gases that increase global warming. The use of modified asphalt also will increase the longevity of road pavement.

And, to improve the timeliness of road maintenance, the Federal Roads Maintenance Agency has begun daily surveillance on all federal roads.

Major Rail Line Construction Announced

After the conclusion of the government forum in late November, Nigeria and China announced a landmark $11.97 billion construction contract to build a high-speed railway along Nigeria’s coastline. China Railway Construction Corp. Ltd. will build the line, which links Lagos in the west and Calabar in the east.

Nigeria’s Minister of Transport, Idris Umar, described the rail line as green and efficient transportation that will promote economic development along its 1,402 km route through the oil-rich region of Nigeria.

The rail line will traverse 10 states and include 22 stops. The construction project will create about 200,000 local jobs, directly or indirectly. When complete, the railway will offer about 30,000 permanent jobs.

“This will open the eyes of investors and encourage them to do more business here,” said Boyo Evah, an area economic analyst. “We hope more initiatives like this will be extended to other regions in Nigeria.”

Industrial Revolution Takes Shape

Minister of Industry, Trade and Investment Olusegun Aganga observes that until President Jonathan launched his industrial revolution plan in the country, Nigeria was merely a consumer of finished goods. Under the Jonathan administration, Aganga reports, the nation’s economic management team has carried out 62 economic and industrial reform programs.

Out of the 62 reforms, 12 were game changers that have helped to redefine the investment climate within the last four years, says the minister.

For example, Nigeria has quintupled its number of automobile manufacturers since 2011. Aganga credits the Nigeria Automotive Development Plan for the industry’s expansion. The plan seeks a total private sector investment of $300 million in the automobile sector by 2016.

“In 2012, we did a lot of consultation on the policy. In February 2013, the automobile policy was approved by the Federal Executive Council,” Aganga says. “Over 22 companies have signed with technical partners to produce cars in Nigeria.”

Aganga explains that compared to auto sector investment of $62 million over the previous ten-year period, $150 million has been invested in less than one year, with about $300 million expected in 2016.“The number of auto vehicle manufacturers in 2011 was four, and today we have 22,” Aganga says.

The country’s universities are aligning their curricula with the auto industry to further support its expansion. “The number of universities offering automotive engineering was nil in 2011, but today we have four,” Aganga notes.

Additional Industry Growth

Aganga reports that with the implementation of reforms in the sugar industry sector, a total investment of $3.2 billion has been made, compared to $100 million in 2011. The sector, which in 2011 employed only 3,850 workers, has created more than 80,000 jobs. Investment has increased in the cement sector as well.

Investment in the sector is now worth $15 billion, and cement-related jobs total about 2.2 million. The minister says the federal government will continue to support the sector, ensuring further reduction of the price of cement to make it easier for Nigerians to build their houses at affordable cost.

Non-oil exports generated $2.3 billion in the last year, Aganga says, crediting his ministry’s proactive trade policies and incentives. He also says that in 2011, Nigeria exported non-oil products to 103 countries and territories out of 220. This shows significant improvement over the previous years.

Free Trade Zones and Small-Business Initiatives

Investments in Nigeria’s Free Trade Zones (FTZs) now stand at $11.1 billion, and 35,120 new jobs have been created in the zones, the minister reports. His ministry is in the process of reviewing FTZ operations to make them more functional.

The Nigeria Industrial Revolution Plan (NIRP) and the National Enterprise Development Programme (NEDP) launched in February 2014 by Goodluck Jonathan are setting the stage for a new era of development for industry and micro, small and medium enterprises (MSME). At the program’s launch in Abuja, Jonathan described the NIRP as a road map aimed at transforming the nation’s industrial landscape, boosting skills development, enhancing job creation and conserving foreign exchange.

Construction equipment at the groundbreaking ceremony for the construction of the second Niger Bridge in March 2014

The NIRP will fast-track industrialization, accelerate inclusive economic growth and create jobs. It is also designed to transform Nigeria’s business environment and stop the drain on the country’s foreign reserves with stepped-up local production. The plan identifies sectors in which Nigeria has competitive and comparative advantage, such as agriculture and agro products, metals and solid minerals, oil and gas, construction and light manufacturing services.

President Jonathan stressed that the NIRP would improve the nation’s investment climate and promote the patronage of made-in-Nigeria products.

“The NIRP will also address the physical constraints that have consistently inhibited the growth of manufacturing by building industrial infrastructure, prioritizing power for industrial use, reducing borrowing cost and mobilizing funds for the real sector,” Jonathan said. “It will help build our industrial skills, improve our investment climate, raise our product standards, link innovation to industry and ensure local patronage of made-in-Nigeria goods.”

Another goal of the NIRP is to increase the contribution of the manufacturing sector to GDP from the present 4% to more than 10% over the next five years. Jonathan expects it to boost the annual revenue earnings of Nigerian manufacturers by up to $28 billion.

Meanwhile, NEDP aims to reposition the MSME sector as the major driver of job creation and inclusive economic growth. The Federal Government will continue to promote the patronage of made-in-Nigeria products through the implementation of local patronage policies and programs.

A 2010 survey conducted by the Small and Medium Enterprises Development Agency of Nigeria and the National Bureau of Statistics showed that Nigeria has about 17 million MSMEs, employing over 32 million people, Jonathan reports. “If each of these 17 million MSMEs employs one additional person, we will create an additional 17 million jobs, thereby reducing employment in our country.

“The NIRP and NEDP will give additional impetus to our Transformation Agenda by ensuring…enterprise development and industrialization,” the president says.“For our own part, the federal government will continue to support local manufacturers by buying vehicles that are made in Nigeria. And as long as those vehicles are produced in this country, the federal government will buy them. So we also encourage the state governments to support the patronage of made-in-Nigeria products in their states.”

Tackling Nigeria’s Industrialization With Electricity Reforms

Nigeria has made the bold move to privatize its electricity sector. The country hopes that this, combined with other reforms, will revive its once-active industrial sector and create a leading manufacturing hub.

With its 2005 Electric Power Sector Reform Act, Nigeria unbundled its government monopoly, National Electric Power Authority (NEPA), into 18 successor companies. The Power Holding Company of Nigeria (PHCN) serves as the holding company. The Nigerian Electricity Regulatory Commission (NERC) was also formed, and the sector moved away from government ownership to the privatesector- driven Nigerian Electricity Supply Industry (NESI).

On November 1, 2013, Nigeria handed over 11 power distribution and five generation companies to private owners. The successful unbundling of the former PHCN has received worldwide attention, with many international organizations describing it as a model that many African countries could adopt.

Power Sector Reform

Nigeria’s Minister of Power, Professor Chinedu Nebo, reports that the nation’s move to put to good use its already completed and commissioned gas-fired power plants has been successful, with concrete arrangements now in place to make gas speedily available to all National Integrated Power Project (NIPP) plants.

The federal government has pursued vigorously the implementation of generation, transmission, distribution and gas to power projects under the aegis of NIPP, Nebo says.

Negotiations are ongoing with other front-runner IPPs, including Zuma Energy, Century Power, ExxonMobil (MPN), Ikot Abasi Power, and Omo Power (Geometric), says Nebo. He also reports that feasibility studies have been concluded for 10 dams for hydropower generation.

“Infrastructure has been a major focus area of my administration, so we pursued the power sector reform to this point of irreversible progress. Nigeria has undertaken a most transparent and corruption-free bidding process, attracting global commendation. The ongoing 450 MW Azura Power Plant in Edo State is a testimony to the success of this transformation.”
President Goodluck Jonathan

Coal to Power

A coal-to-power committee has developed an action plan for a coal-fired power plant. The committee has so far recorded modest achievements in facilitating investment in a coal-fired power plant by Zuma Energy and Pacific HTG Ltd. African Development Bank is providing credit support to the Nigerian Bulk Electricity Trader (NBET) in the form of partial risk guarantee for coal-based IPPs. The Federal Ministry of Power, in partnership with the Federal Ministry of Mines and Steel Development, is currently developing bankable project documents to facilitate investment in coal to power.

“Licenses have been given to real investors who are ready to do coal to power,” says Nebo. “It is with the insistence of steel and mine. We are synergizing with IPPs to actualize coal to power.”

Strengthening Power-Sector Agencies

President Jonathan has strengthened various government power institutions, including the Nigerian Electricity Regulatory Commission (NERC), Nebo says. “We have successfully handed over the Trading Point Meter to operation participants in readiness for the Transitional Electricity Market (TEM). Workshops for training of participants on market rules, market procedures and a market payment system for efficient, all-inclusive, high-quality performance have been organized.”

An Electricity Management Services Limited (EMSL) team was inaugurated on September 10, 2013. Its role is to carry out technical inspection and certification of all electrical materials, equipment and installations in the Nigerian electricity supply industry. The inauguration of the National Council on Power (NACOP) followed on August 14, 2014. The National Power Training Institute of Nigeria (NAPTIN) has also been restructured. More technical departments were added to the institute in line with the realization of the Jonathan administration’s transformation agenda.

“Overall, the federal government is targeting 20,000 MW by 2020,” says Nebo, “and so we are working towards 75% coverage, to make sure that no Nigerian community is left in darkness.”

Nigerian President Jonathan and Vice President Joe Biden at the U.S.-Africa Leaders Summit in Washington, D.C., in August 2014

Response to Lower Oil Prices

The Central Bank of Nigeria (CBN) responded to the drastic crash in the price of crude oil—Nigeria’s largest revenue earner—by releasing a set of tight monetary measures to prevent inflation and maintain monetary stability in the country.

The measures included raising the Monetary Policy Rate (MPR), the rate at which the CBN lends money to deposit banks, from 12% to 13%; increasing the Cash Reserve Requirement (CRR) on private-sector deposits from 15% to 20%; and devaluating the naira in its exchange with the U.S. dollar from N155 to N168 per greenback.

The CBN also advised the Federal Government to further cut down on the proposed oil benchmark for the 2015 budget—below the new $73 window—to be in a safer position, as the oil price drop appears to be consistent.

These measures came barely a week after the Federal Ministry of Finance announced fiscal austerity measures in reaction to the drastic drop in oil prices, which saw the federal government lowering next year’s oil budget benchmark price from $78 to $73.

CBN Governor Godwin Emefiele reeled out the measures at the end of a special Monetary Policy Committee (MPC) meeting, the committee’s last for fiscal year 2014 before the 2015 general election.

Emefiele, who also chairs the MPC, explained that the action was taken to minimize the impact of the oil price drop, discourage frivolous borrowing by politicians to spend for campaigns and shore up Nigerian foreign reserves, which dropped from a little above $40 billion to $36 billion at the end of October 2014.

“The robust output expansion amidst strong headwinds arising from a weakening of the international oil market gives credence to the efficacy of our macroeconomic policy,” Emefiele told journalists at a post-MPC briefing.

Yar’Adua Expressway in the capital city of Abuja

“The Committee found credence in the permanency theory of current oil price dynamics in the fact that the political restiveness in the Middle East and North Africa (MENA) region has not created uncertainty in oil supplies, as both Libya and southern Iraq have open and strong supply lines in the market,” Emefiele said.

Also, the Committee was of the view that the current challenge requires bold policy moves on both the demand and supply sides of the foreign exchange market.

“Bold policy and administrative measures in the management of the nation’s stock of foreign exchange reserves have become inevitable in order to align the market towards its long-run equilibrium path,” the central bank leader noted. He emphasized that the current situation demands that the CBN confront the issue of declining external reserves head-on in order to strengthen the value of the domestic currency.

“Consequently, stabilizing prices and maintaining exchange rate stability and charting a sustainable path for medium to long-term growth are the immediate top priorities,” he said.

“In the Committee’s opinion, a more flexible naira in the face of nonexistent fiscal buffers was the most viable policy option at a time of heightened demand pressure for foreign exchange and falling oil prices. Also, given the level of excess liquidity in the banking system, it becomes imperative for the bank to address the sources of the foreign exchange demand pressure,” Emefiele added.

Nigerian Minister of Industry, Trade and Investment Olusegun Aganga

Aganga reports that with the implementation of reforms in the sugar industry sector, a total investment of $3.2 billion has been made, compared to $100 million in 2011.

Nigeria’s Bright Future and Challenges

Ultimately, there is a real contradiction here that needs to be addressed. Whereas the echoes of optimism in “Africa Rising” reverberate across the globe, the narrative on Nigeria—a key driver of the continent’s transformation— is often filled with tales of pessimism. Yet the country’s future is very bright and its key economic indicators are sound.

Open for Business

The DRC's Enticing Value Proposition

U.S. Secretary of State John Kerry and DRC President Joseph Kabila in Kinshasa in May 2014

The Democratic Republic of Congo (DRC) has been one of the leading economies of sub-Saharan Africa, and it is not showing any signs of slowing down. In 2013, the DRC’s GDP grew by 8.3%, according to the IMF and government reports, and growth in 2014 is expected to reach double digits.

The DRC holds tremendous potential in its mineral resources, human capital, manufacturing capabilities and agriculture. Endowed with over $24 trillion worth of mineral wealth, including copper, diamonds and coltan—the dull, black mineral used in virtually every electronic device—the nation is vital to technology all over the world and the growth of the consumer electronics market.

According to Prime Minister Matata Ponyo Mapon, “Our economic performance is the strongest since the 1960s. We have an inflation rate from January to the present of just 0.3%. We registered 8.2% real GDP growth last year. That makes us number five on the continent in GDP growth. This country is on the move.”

President Kabila, Prime Minister Ponyo and dignitaries attend the July 15 inauguration at Bukanga Lonzo, the DRC’s first agricultural business park.

Underlying this tremendous growth is a stable macroeconomic framework and policies that not only have encouraged growth, but have kept inflation at 1%, the lowest inflation rate the nation has exhibited since it achieved independence over half a century ago.

The DRC is quickly beginning to challenge other emerging markets as a prime destination for foreign investment.

It was this message of stable but remarkable growth that Prime Minister Ponyo expressed to investors and government officials when he visited the Netherlands in late October.

During his visit, Prime Minister Ponyo met the Dutch Prime Minister, Mark Rutte, and the Dutch Minister of Foreign Trade and Development Cooperation, Lilianne Ploumen. The prime minister also met with two Africa-focused Dutch business organizations, the Southern African-Netherlands Chamber of Commerce (SANEC) and the Netherlands-African Business Council (NABC).

These two groups organized a DRC Business Forum in Noordwijk for the Congolese delegation that enabled the Dutch private sector to discover the Congolese market. At the forum, Prime Minister Ponyo took the opportunity to talk to representatives of Dutch companies that are already successfully operating in the DRC.

Throughout the visit, the Congolese prime minister reiterated the necessity for foreign partnerships as the DRC continues to grow. Through the transfer of technological advances and private and public investments, Africa looks forward to new foreign partnerships as it rises to compete on a global scale.

Reforms Drive Success

The DRC stands as a beacon of perseverance—one that serves as a model for other Central African nations. Its ability to harness international investments and government partnerships has been a key to its success.

Working closely with members of the international community, Prime Minister Ponyo and President Joseph Kabila have improved the country’s business climate and have simultaneously implemented social reforms to benefit each layer of Congolese society. These changes range from creating transparent processes and minimizing bureaucracy when starting businesses to creating anticorruption programs.

Formerly the nation’s minister of finance, Prime Minister Ponyo has become popular, garnering praise both within his country and in the international community. He is a technocrat with the ability and passion to bring change to the DRC and a firm believer in stability and the private sector as the keys to growth. He has worked to encourage free enterprise throughout the DRC. During his tenure within the ministry, Ponyo helped change the investment climate of the nation and began enacting new measures to protect shareholders and boost capital flow to the country.

As prime minister, Ponyo has focused his attention on key initiatives to help the nation prosper. From bolstering the legal system by implementing investor-friendly regulations to lowering corporate taxes and decreasing the amount of bureaucracy for starting and running enterprises, the prime minister followed through on actionable goals to illustrate to the world the potential of the DRC under proper governance.

Prime Minister Ponyo seeks to create business environments similar to those of developed nations, and understands that the future of the DRC rests, not on the government, but on a public-private mandate to create opportunities and growth, which can only occur when the rule of law and good governance protect the rights of investors and citizens.

“Building a strategic vision for long-term development requires sound political leadership, tireless reform efforts aimed at reinforcing the quality of the administration and vital institutions, and adhering to the rules and practices of good governance regarding our natural resources,” asserts Prime Minister Ponyo.

Working closely with members of the international community, Prime Minister Ponyo and President Joseph Kabila have simultaneously improved the country’s business climate and implemented social reforms to benefit each layer of Congolese society.

Rising to the Challenge

According to the IMF, in recognition of the need for better governance, many resource-rich countries in sub-Saharan Africa, such as the DRC, have made a great deal of progress in the quality of their institutions over the past few years. In fact, over half of the natural resource providers have improved their World Bank Worldwide Governance Indicator ratings on rule of law and corruption, and about 40% of these countries have improved their ratings on government effectiveness.

President Kabila’s latest example of creating a more favorable business climate can be seen in his efforts to tighten controls on granting mining licenses to prevent abuse and fight corruption. Desiring to instill better corporate governance throughout the economy, he sees this as a giant step forward to creating an ideal environment for investors and the nation’s stakeholders.

Improper control mechanisms have led to underdevelopment that has cost the country in tax revenue and in the livelihood of citizens throughout the mineral-rich portions of the nation.

Huawei Senior Vice President Guo Tianmin, President Kabila and Prime Minister Ponyo officiate at the opening of Huawei’s regional training center, which will enroll up to 2,000 students per year for technical training. Building strong education infrastructure has been one of the major goals of the current administration.

According to President Kabila, “We need to put an end to the paradox which sees huge mining potential, and ever more intense mining activity, but only modest benefits for the state.” He adds that some of the mismanagement “has had negative consequences for the improvement of the population’s living conditions.”

In July of this year, the DRC earned full membership to the Extractive Industries Transparency Initiative (EITI), the global organization promoting good management of oil, gas and mineral resources.

“Despite all the challenges facing the country, the Congolese people have been working together to bring transparency and accountability to the management of their natural resources,” says Clare Short, the group’s chair.

The nation has advanced remarkably over the last few years—economically, socially and politically—under the leadership of President Kabila and Prime Minister Ponyo. As one of the largest democracies in Africa, the nation has shown resilience after overcoming years of civil strife and factious violence.

The rise of the DRC signals an evolution of Africa and offers a look at what the best of Africa can come to represent. Underpinned by strong governance, a diversified economy and an ambitious modernization plan, this nation of 70 million is on the cusp of an unprecedented emergence as an African superpower.

Strong Governance Fuels Growth

The DRC is among the largest democracies on the African continent. Elected in the nation’s first democratic election in decades in 2006 and once again in 2011, President Kabila began his leadership of the DRC following the assassination of his father, Laurent Désiré-Kabila, in 2001.

President Kabila saw the need to make quick reforms to once again unite the country after a national tragedy and civil strife. He pulled together a robust team of advisors and facilitators to begin rebuilding the fabric of the DRC by creating a framework to help facilitate economic growth and boost the welfare of the Congolese people.

Under this framework, entitled Les Cinq Chantiers de la RDC (the Five Pillars of the DRC), Kabila developed a long-term plan to create a better Congo for its citizens by supplementing the country’s trade policy with foreign governments and boosting domestic investments. He is determined to improve infrastructure, provide wider access to electricity, develop the educational system, foster higher employment and provide housing for all.

President Kabila continuously seeks to build the nation’s infrastructure and help develop businesses through public-private partnerships, which not only efficiently deploy capital, but also create demonstrable changes for the country’s citizens.

Improving the nation’s healthcare infrastructure continues to be one of President Kabila’s top priorities. While South Africa and Dubai have been traditional healthcare destinations for Africans, the DRC is quickly making a name for itself by offering world-class facilities and physicians.

Dutch Minister of Foreign Trade and Development Cooperation Lilianne Ploumen and Prime Minister Ponyo confer during the DRC Business Forum in the Netherlands.

One example of progress in healthcare is the Hôpital du Cinquantenaire in Kinshasa, which President Kabila and Minister of Public Health Felix Kabange Numbi inaugurated in March 2014. The Ministry of Public Health is currently working to create a healthcare pricing structure throughout the country that will allow affordable healthcare for Congolese citizens at this and other planned worldclass hospitals currently under development.

Funded through a joint venture with Sinohydro, a large Chinese engineering firm, Jubilee is a 500-bed hospital that brings world-class medicine back to the DRC. The hospital will be operated by the Padiyath group, which manages hospitals throughout India and the Middle East.

Prime Minister Ponyo (front row, center) poses for a group photo with representatives from the DRC and Heineken International at the Amsterdam brewery in October.

In addition to building world-class hospitals throughout the country, the DRC is looking for ways to make the management of the current health sector more effective by computerizing health records, and is working on a national plan that will enable it to create a system of electronic medical record keeping.

Secretary General of Health Pascal Mukengeshay Kupa, representing the Ministry of Public Health, attended the presentation ceremony of the National Plan for the Development of Health Informatics (PNDIS). PNDIS consists of the first part of an e-health architecture, which includes a set of information, data and hardware that are necessary for design and operations.

Prime Minister Ponyo addresses the representatives of Dutch companies at the Forum.

Public-private partnerships such as the Hôpital du Cinquantenaire have proven to be vital to the growth of the country. In President Kabila’s vision for modernization, specific efforts to improve infrastructure, education, electricity, employment and housing are the key components of the nation’s long-term growth strategy.

President Kabila’s work to overhaul the nation’s aviation infrastructure, for example, has resulted in discussions with Air France to partner with local airlines to create a pan- African network based in the DRC. Acknowledging the nation’s commitment to aviation, Ethiopian Airlines, the second-largest air carrier in Africa, opened a hub in the DRC’s main airport, N’Djili Airport.

Prime Minister Ponyo and Dutch Prime Minister Mark Rutte during a break at the DRC Business Forum in Noordwijk.

Ethiopian Airlines has been considering the DRC for the establishment of a regional carrier in Central Africa. According to Ethiopian Airline CEO Tewolde Gebremariam, “The Congo is a large country and a large market, and while peace has been a problem, there seems to be a better situation developing.” He adds, “We think it’s going to attract a lot of foreign direct investment, and it is right in the middle of central Africa.”

Another such infrastructure project beneficial to the Congolese people can be seen in the redevelopment of the nation’s roads and bridges. The African Development Bank recently approved a grant of $82.7 million for the development of a 56-km-long highway between Lovua and Tshikapa on the Batshamba-Tshikapa NR1 highway in the DRC. The grant supplements earlier bank interventions to support work on the same road, which serves as a vital roadway for surrounding towns.

Prime Minister Ponyo lays the first stone marking the start of construction work on the Municipal Stadium Project (PROSTAM) in the Matate municipality of Kinshasa.

The work includes the construction of a new bridge over the Kasaï River passing through Tshikapa town. The upgraded road also aims to improve the service level of the transport logistics chain on the Kinshasa- Tshikapa road and the living conditions of people in the area. The project is expected to help open up the Bandundu and West Kasaï provinces.

As the DRC continues to grow, opportunities for investment are abundant. The government and its partners have come a long way to ensure macroeconomic stability and to develop a business-friendly climate. The nation leads the charge across the world to show that Africa is indeed open for business.

President Kabila, Prime Minister Ponyo and dignitaries attend the stone-laying ceremony at the Municipal Stadium Project (PROSTAM). The project, initiated by the government, includes the construction of five municipal international-standard stadiums.

Diversifying the DRC's Economy

The current economic mix of the DRC is heavily skewed toward the country’s natural resources, so diversifying the economy and developing human capital have been a hallmark of Prime Minister Ponyo’s work.

“While the country is very wealthy in natural endowments regarding mineral resources, it is imperative to diversify beyond this wealth alone to propel the DRC to a state that can compete economically on a global scale,” he explains.

The amount of gold produced by the DRC is on track to be four times the amount produced last year. The Minister of Mines, Martin Kabwelulu, stated at a mining conference in Kinshasa earlier in the year that the nation’s gold output this year is targeted at 18 tons.

“The production was more or less 100 kilos in 2007, and expanded to 4 tons last year, while this year we hope it will reach 16 to 18 tons,” he said.

The increase in output is largely due to the opening of new mines, particularly the Kibali gold mine, owned by Randgold Resources and AngloGold Ashanti, each with a 45% stake, and the DRC state gold mining company, Société Minière de Kilo-Moto. Kibali officially opened on May 2, 2014, following the investment of $2.5 billion by Randgold and Anglo-Gold Ashanti.

One of the many ways the Congolese are shaping their future economy is by investing in the development of a world-class agricultural sector and focusing on agricultural extension services as well as research, energy, science and technology. The nation’s leaders are paying close attention, as this investment can potentially propel the economy forward by fortifying the export market, and also help fight hunger and malnutrition.

To support agriculture and encourage private-sector participation, Prime Minister Ponyo developed and launched a nationwide program known as the National Agricultural Investment Plan (NAIP). NAIP’s main objectives are ensuring food security and developing the agribusiness sector, and its first project will be the development of 16 large agro-parks.

According to Councilor John Mususa, one of the leaders spearheading the project, “These parks will serve as an important part of the country’s rehabilitation and construction process by providing access to agricultural inputs and by combining laboratories, training facilities, storage centers and health facilities.”

Agriculture is a vital industry that Prime Minister Ponyo seeks to boost throughout the vast DRC. His aim is to provide the Congolese ample opportunity to create an agricultural sector unrivaled in Africa.

Kibali worker at the furnace in the gold room

By using its water, land and energy resources, the DRC can develop an industry of commercial farms offering fishing, livestock and vegetable production, connected to a coherent network of production and food distribution.

According to Prime Minister Ponyo, “Agriculture must be one of the main sectors of focus used to spearhead the Congolese economy to unprecedented levels. The agricultural sector is where we can have the most significant impact on the population.”

Like agriculture, the energy sector is considered vital to economic growth within the DRC, especially as its large-scale mining and industrial sectors continue to see significant growth.

Paramount to the energy future of the DRC and the African continent is the Inga Dam Project, which is one of the largest infrastructure projects ever undertaken. The centerpiece of the Inga Dams, the Grand Inga Dam, will be the world’s largest hydropower project and is an instrumental part of Africa’s future energy strategy.

The dam has the potential to generate 38,000 MW of energy at a cost of $80 billion. It will help power South Africa, Botswana and Angola, and will ultimately be able to export power to Europe. The first part of the project, Inga III, will top off at a nameplate capacity of 4,800 MW.

The Kibali gold project poured its first gold bar in September 2013, well ahead of schedule.